Academic journal article Business: Theory and Practice

Intellectual Capital Approach to Modern Management through the Perspective of a Company's Value Added

Academic journal article Business: Theory and Practice

Intellectual Capital Approach to Modern Management through the Perspective of a Company's Value Added

Article excerpt



It can be observed that starting from Taylorian organisations that prevailed between 1945 and 1975, operations improvement was synonymous with maximisation of profit growth. Performance expressions were purely financial: efficiency or the workmanship, productivity ratios computed every month, or the turnover computed every year (Chandler 1988). During the modern period between 1975 and 2014, performance has progressively become expressed using multiple criteria, integrating such technical and knowledge criteria as quality levels and delivery dates in addition to costs (Kaplan, Norton 1992; Lebas 1995; Grabot, Geneste 1998). From this perspective, technical and knowledge reports on the status of processes have been introduced (Fortuin 1988; Kay 1995; Berrah et al. 2000) as provided in Table 1.

Moreover, nowadays performance does not only depend on production processes; therefore, new performance expressions are considered not only at the strategic level but also at all decision levels (strategic, tactical and operational). Thus, in terms of performance expressions in a modern company, knowledge must be considered from top to bottom for all the activities or processes to be controlled (Bititci 1995; Rangone 1996; Ghalayini et al. 1997; Suwignjo et al. 2000).

The authors believe that the study of the process of value creation through intellectual capital as a model, will allow using a more efficient integration of industrialisation elements into a business strategy. In the Information Age, effective use of intellectual capital is the most important factor that determines the success or failure of a business (Grabot et al. 1996; Goh 2005). To achieve superior performance and competitive advantage, companies have shifted their focus from investment in tangible assets to investment in intangibles. Intellectual capital is one of these intangibles with human capital, structural capital, and customer capital as its components (Chang 2004).

Internal resources used to be primary inputs into processes of organizational value creation; however, classical economic laws are hardly applicable to knowledge and other intangible resources. Based on the intellectual capital approach, the paper begins the research that explores the effect of intangible resource on the creation of added value. In the modern knowledge-based economy, the growing distance between the market and book value is attributed to intangible assets that cannot be properly measured and reported within the traditional accounting framework. It is also possible for each company to use a different accounting method (Laing et al. 2010). Although various methods have been proposed for measuring intellectual capital, none of these methods can, in and of itself, satisfy all the needs of an organisation for measuring intellectual capital.

1. Intellectual capital approach

The concept of intellectual capital started to formalise in the early 1990s, once Edvinsson and Malone (1997), presented the work of Skandia as a supplement to the annual shareholders report to describe the "true" value of the company. A new model was created to identify the roots of a company's value by measuring hidden dynamic factors that underlie "the visible company of buildings and products". By the end of the 1990s, references to intellectual capital in contemporary business publications were regular (Bontis 1999; Stewart 1991). Various definitions have been given by researchers to the concept of intellectual capital (Brooking 1996; Bontis 1996; Roos et al. 1997; Stewart 1997; Bontis 1999; O'Donnel et al. 2000; Bowman, Ambrosini 2010). Many scientists started to define intellectual capital and ended up with similar opinions (Bontis 1999; Stewart 1991; Brooking 1996; Standfield 1999; Rylander et al. 2000). What resources actually make up these generic capital forms is unique to each and every organisation, as only those resources that are important for creating value should be included in constructing the distinction tree for an organisation (Bontis 1999). …

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